Is There Profit Potential With Organic Producers?

Jimmy Wedel should be every full-service ag retailer's dream prospect. At 4,000 acres, he's big. He's diversified, growing everything from dry beans, soybeans, alfalfa and cotton to corn, wheat and peanuts. He's good at what he does, with soybean yield averages as high as 82 bushels and corn making 220 bushels with sufficient water.

The Texas panhandle farmer is also active on various influential committees and boards, including the Texas Corn Producers Board and the board of directors for the Corn Producers Association of Texas and formerly served on the Research and Business Development Action Team for the National Corn Growers Association.

Instead of prospect, the organic farming Wedel is every ag retailer's nightmare. "I started switching to organic more than 20 years ago," he said. "We're now about 95 percent organic. Beyond the seed I buy, feedlot manure and compost is about the only off-farm input."

Wedel relies on his soil's fertility and the arid conditions in which he farms for his crop protection. He also is resigned to the fact that when pests do hit, there is little he can do about it. It's a risk he is willing to take and one that has had an impact on other producers.

"When I started to go organic, I was using state Extension entomologists to set up an IPM program on my conventional acres," recalled Wedel. "They would scout my organic acres just to see what was happening in absence of pesticides being sprayed. They realized the cotton could withstand higher thresholds than they expected without significant damage. That caused them to hold off spraying longer on conventional acres."

When Wedel's longtime friends and neighboring farmers and ranchers (his is a third-generation farm) give him grief about being organic, he has a simple response. "Why don't you grow for a market that wants to buy your stuff?" he asked.

ORGANIC ACRES BOOM

In the 20 years since Wedel began his conversion, the organic market has gone from $1 billion in 1990 to $26.2 billion in 2010, approximately 4 percent of all food and beverage sales. The on-going recession had little impact, with sales up 7.7 percent from 2009 to 2010 and more than half being sold through conventional retailers, such as the reputedly largest organic marketer, Walmart.

Acres have increased, too. Certified organic cropland increased on average 15 percent per year from 2002 to 2008. Total organic crop acres in 2008 reached 2.6 million acres with another 2.1 million in organic certified pasture. Although California claimed nearly a sixth of all crop land, other large organic farming states included Wisconsin, North Dakota, Minnesota and Montana.

Luckily for ag retailers, not all organic farmers are like Wedel. Like their conventional counterparts, most are in the market for crop inputs and services. The difficulty for farmers can be finding them. While providing inputs and services to this small, but growing market is a fraction of Wilbur-Ellis' overall business, it is one the organization takes seriously. They carry more than 70 products certified for organic use. Although most are plant nutrient related, the company also carries pesticides labeled for organic use.

According to Dick Barrett, director, branded product, Wilbur-Ellis looks at organic producers much as it does any specialty market. That's especially true of those transitioning to organic.

"They are no different from someone starting to grow a new crop," he said. "We believe that anytime you participate in a new or different segment of agriculture, whether organic or not, you learn something. Our objective is to be a good listener and constantly learn so you are able to help your customer in their business."

Barrett reports the company's organic business is growing at a similar rate to its conventional business. It is careful growth designed for long-term customer and consumer confidence. "We don't sell anything to the producer that we haven't tested or developed a confidence in the supplier's testing," he said. "If we aren't confident in a product, we don't recommend it. If the customer wants to take a chance on a product we can't recommend, we don't participate in the business."

ORGANICS ARE ANOTHER SPECIALTY CROP

Orvin Bontrager, a Servi-Tech, Inc. crop consultant, takes a similar view with a longtime organic client. While Bontrager has more than earned his stripes as a consultant in conventional agriculture, he admitted to having perhaps learned more from his organic producer than having taught him. One reason is the tendency of organic producers to try things recommended to them by other producers. In part, this is due to the limited number of commercial inputs available. It is also likely due to organic producers being risk takers in the first place. Bontrager noted that some products provide a return and some don't.

"You definitely have to recognize that for true hardcore organic farmers, it is more philosophy than science," said Bontrager. "However, the things they are doing can coordinate with conventional agriculture. If you see both sides of the issue, there is more common ground than most would admit."

Bontrager works with his client on his use of compost, directing where it is needed. He’ll also recommend products, an example being Entrust Naturalyte, an Organic Materials Review Institute (OMRI) listed, Dow AgroSciences insecticide.

"I probably know more about the product than the local Dow rep," said Bontrager. "It's a good product for growing corn organically and works effectively if put on properly. You have to be scouting and be on top of problems as most organic products don't have residual."

Bontrager's duties extend to working with custom applicators applying products such as Entrust Naturalyte. "It took a year or two to get a local aerial applicator to work with my grower," said Bontrager. "It required flushing his tank thoroughly to make sure it wasn't contaminated by other chemicals. The pilot was nervous about applying to organic fields and wanted me involved as a third party."

MEETING CERTIFICATION CHALLENGES

One of the biggest problems for Bontrager and his client is accessing products. Although the local ag retailer can order products like Entrust Naturalyte, the limited market doesn't justify keeping it in stock. That may change as more and more biological products are introduced, assuming these largely "natural" products are registered with OMRI and other organic product certifying groups. Product availability also may change as the market grows and retailers and consultants see new opportunities.

Servicing organic business does offer its own challenges due to product certification. All products must meet USDA's National Organic Program (NOP) standards and be certified by organizations such as OMRI and Washington State Department of Agriculture Organic Program (WSDA), two entities who review and validate products for compliance with the NOP rules. The California Department of Food and Agriculture introduced its own organic review program for fertilizers earlier this year.

"Our challenge is to make sure we are not recommending a product that isn't certified, and certifications do change," said Barrett. "While the burden of knowing about certification falls on the producer, as a trusted advisor, you want to be an aware resource. It is a challenge to be on top of it, especially when it is not a significant part of a sales representative's business."

"In every area, there are some organic producers, and there is potential to work with them," said Bontrager. "I wouldn't want it to be my main source of income, but it is an interesting part of the stream. It lets me visit more intelligently with folks at meetings, whether other consultants, ag dealers, or those not involved with production agriculture. If a segment of the public is willing to pay the higher price for organic food, then we will produce it. I am convinced we can learn from each other. Producing organic food is no different from any other specialty crop."